GDP Down 9.5%; US Economy at Its Worst: Live Market Updates – The New York Times

Credit…Jim Wilson/The New York Times

Mark Zuckerberg, the chief executive of Facebook, displayed the social network’s enormous financial clout on Thursday, even as the company has dealt with regulatory scrutiny and advertiser boycotts.

Facebook’s revenue for the second quarter rose 11 percent from a year earlier to $18.7 billion, while profit jumped 98 percent to $5.2 billion. The results were well above analysts’ estimates of $17.3 billion in revenue with a profit of $3.9 billion, according to data provided by FactSet.

More than three billion people come to Facebook or one of its family of apps on a regular basis, as the services have overtaken much of the developed world. And some 2.47 billion people use one or more of Facebook’s apps every day.

The company said its number of monthly active users rose 12 percent from a year ago and added that it was seeing record levels of engagement and usage this year because of the coronavirus pandemic and the shelter-in-place orders around the world.

“We’re glad to be able to provide small businesses the tools they need to grow and be successful online during these challenging times,” said Mr. Zuckerberg, who was grilled by lawmakers on Wednesday over Facebook’s power. “And we’re proud that people can rely on our services to stay connected when they can’t always be together in person.”

Facebook’s earnings have long been a bright spot for the Silicon Valley company. Despite increasing scrutiny from regulators, questions about its role in subverting elections and how people use the platform to spread misinformation, users have continued coming back to its services. Because of this, advertisers have consistently spent money on the platform.

But that started changing in late June when a grass-roots campaign, Stop Hate For Profit, rallied many of the top advertisers on Facebook to pull back their spending because of issues of hate speech on the site. Facebook has tried to assuage the concerns, but has made it clear that it will not change its policy about free speech on the site based on outside threats to the business.

Facebook cautioned investors on Thursday that fallout from the ad boycott was noticeable in July. The company warned that greater economic turmoil from the pandemic could also eventually affect its bottom line.

Credit…Philip Cheung for The New York Times

Buoyed by a pandemic-induced surge in online shopping, Amazon on Thursday reported record sales and profits in the latest quarter.

Amazon had $88.9 billion in quarterly sales, up 40 percent from a year earlier. Profit doubled, to $5.2 billion, even though the company invested heavily to improve the safety in Amazon’s warehouses.

Analysts expected the company to have $81.4 billion in sales and $665 million in profit, according estimates compiled by FactSet, a financial data firm. Shares in the company jumped more than 6 percent in after-hours trading.

“Simply put, Covid-19, in our view, has injected Amazon with a growth hormone,” Tom Forte, an analyst at the investment bank D.A. Davidson & Company, wrote in a recent note to investors.

The profit came even as Amazon invested $9 billion in expanding warehouses and other capital expenditures to increase its capacity. “It’s a good problem to have,” Brian Olsavsky, the company’s finance chief, said on a call with reporters.

In April, Jeff Bezos, Amazon’s chief executive, told investors to expect no operating profit, and maybe even a loss, as the company planned to spend about $4 billion on coronavirus-related expenses, including temporary pay increases, declines in warehouse efficiency because of social distancing and $300 million for testing its work force for the virus.

“If you’re a shareowner in Amazon, you may want to take a seat, because we’re not thinking small,” he said at the time.

Amazon had been paying workers an extra $2 an hour, but that benefit expired in May. At the end of June, it announced one-time “thank you” bonus of $500 for full-time associates in its warehouses.

But even those costs did not compare to the immense surge in demand, with online retail sales up 48 percent. As Americans have stayed home during the virus, they have flocked to online shopping.

“E-commerce is off the charts right now,” said Guru Hariharan, a former Amazon employee whose company, CommerceIQ, helps major consumer brands manager their Amazon business. The initial shock of panic buying has subsided, but “demand is starting to stabilize, at a much higher level,” he said. Mr. Olsavsky said customers returned to buying more profitable products, like clothing, versus lower-margin groceries and cleaning suppliers.

One of the biggest challenges Amazon had expected was keeping up with demand, as the virus flared among its workers and the communities where they live. Mr. Olsavsky said the company was able to fulfill more orders than it had previously expected. The number of products it sold grew 57 percent, but the number of employees it had was up just 34 percent.

On the call with reporters, Amazon declined to say if it would be paying its warehouse workers more in the current quarter. It said that pandemic-related expenses would fall to $2 billion in the quarter.

See also  Email marketing service cuts ties with pro-2nd Amendment nonprofit in latest tech censorship - Fox Business

Sales at Amazon’s lucrative cloud computing business, whose customers range from major corporations to start-ups, grew 29 percent, to $10.8 billion, falling short of analyst expectations, though it was more profitable than they expected.

Credit…Jason Henry for The New York Times

Alphabet, the parent company of Google, reported its first-ever decline in quarterly revenue on Thursday, hurt by a slowdown in spending by advertisers.

Alphabet said its revenue fell 2 percent to $38.3 billion in the second quarter compared with a year ago. The decline came largely from lower sales of advertisements that run alongside its search results because of the coronavirus pandemic, although the company posted an increase in revenue from YouTube ads and its cloud-computing business.

The results were the first time that quarterly revenue had declined in its 17 years as a publicly traded company, but Alphabet exceeded analysts’ expectations for revenue and profit. Net profit totaled $6.96 billion, down 30 percent from a year ago.

Credit…Nolis Anderson for The New York Times

Ford Motor said Thursday it earned $1.1 billion in the second quarter as a large one-time gain in the value of its investment in an autonomous driving company more than offset losses in its main business.

Without the gain, from its stake in Argo AI, Ford lost $1.9 billion excluding interest and taxes. The result was better than Ford’s earlier forecast of a pretax loss of $5 billion.

The coronavirus pandemic forced Ford and other automakers to close factories for nearly two months starting in March. On Wednesday, General Motors said it lost $758 million in the second quarter.

Ford said in a statement that it expected “no further significant coronavirus-related disruptions to production” in the second half of the year. But the company also said it was not expecting “meaningful change in the current economic conditions.”

Ford’s chief executive, Jim Hackett, said in a conference call that reductions in spending and an efficient restart of production enabled the company to avoid the kind of dire results it forecast in April. In after-hours trading, Ford shares rose more than 2 percent to about $6.90.

The automaker forecast that it would earn $500 million to $1.5 billion on a pretax basis in the third quarter, amid weaker demand for new vehicles, parts and services.

Ford’s deliveries of new vehicles fell by half to 645,000 in the second quarter largely because of the pandemic. Its auto operations lost money in every region in the world, including a $954 million setback in North America.

The company used up $5.3 billion in cash in the quarter, but said it still has $39 billion on hand at the end of June.

Ford recorded a gain of $3.5 billion from a transaction related to an alliance it formed with Volkswagen, which bought a stake in Argo AI.

Ford has been trying for three years to streamline its operations and return to robust profits, but has come under criticism for slow progress. Mr. Hackett said Ford was pinning its hopes on new vehicles it unveiled in the last few weeks: a redesigned version of its F-150 pickup truck and a line of rugged sport-utility vehicles that will be marketed under the Bronco name. The company said it had already taken reservations for 150,000 Broncos.

Credit…Victor J. Blue for The New York Times

From April through June, millions of people lost their jobs, thousands of businesses closed — and Apple made a further $11.25 billion in profits.

A global economic slowdown in the second quarter did not faze one of the world’s richest and most resilient companies, as people kept buying Apple devices en masse and paid the tech giant billions of dollars more for apps and services on those gadgets.

Apple said its sales rose 11 percent to $59.7 billion and its profits increased 12 percent to $11.25 billion. Both figures handily beat analysts’ expectations, with Wall Street having forecast declines in both areas.

Revenue rose for all of Apple’s product categories and in all of its geographic areas, unusual success even by Apple’s lofty standards.

Sales were particularly strong for iPads and Mac computers, as the public was increasingly forced to work and socialize virtually because of the pandemic. Revenue also surged in its internet-services business, which includes Apple’s cut of sales from the App Store, the subject of antitrust investigations in the United States and Europe. Even the iPhone, which remains the company’s biggest seller, notched a slight increase in sales for only the second time in the past seven quarters.

Luca Maestri, Apple’s finance chief, said in an interview that the shift to working and learning from home had led more people to splurge on Apple’s devices. “Our products and services are very relevant to our customers’ lives, and in some cases, even more during the pandemic than ever before,” he said.

See also  Jony Ive, Star Designer of the iMac, iPod, and iPhone, to Leave Apple - Fortune

But while the pandemic has further entrenched the biggest tech companies’ power, Mr. Maestri disputed the idea that it had been good for business, saying the quarter would have been even stronger without it. “We believe we’ve lost several billion dollars because of the pandemic,” he said.

Investors have flocked to Apple’s shares as a safe haven from an economic recession, pushing its stock price up about 30 percent this year to a roughly $1.67 trillion value.

Economic output fell at its fastest pace on record last spring as the coronavirus pandemic forced businesses across the United States to close their doors and kept millions of Americans shut in their homes for weeks.

Gross domestic product — the broadest measure of goods and services produced — fell 9.5 percent in the second quarter of the year, the Commerce Department said Thursday. On an annualized basis, the standard way of reporting quarterly economic data, G.D.P. fell at a rate of 32.9 percent.

G.D.P. shrank $1.8 trillion in the 2nd quarter.

Gross domestic product, adjusted for

inflation and seasonality, at annual rates

G.D.P. shrank $1.8 trillion in the second quarter.

Gross domestic product, adjusted for inflation and seasonality, at annual rates

The collapse was unprecedented in its speed and breathtaking in its severity. The only possible comparisons in modern American history came during the Great Depression and the demobilization after World War II, both of which occurred before the advent of modern economic statistics.

Unlike past recessions, this one was a result of a conscious decision to suspend economic activity to slow the spread of the virus. Congress pumped trillions of dollars into the economy to sustain households and businesses, limit long-term damage and allow for a rapid rebound.

The plan worked at first. In recent weeks, however, cases have surged in much of the country. Data from public and private sources indicate a pullback in economic activity, reflecting consumer unease and renewed shutdowns.

“In another world, a sharp drop in activity would have been just a good, necessary blip while we addressed the virus,” said Heather Boushey, president of the Washington Center for Equitable Growth, a progressive think tank. “From where we sit in July, we know that this wasn’t just a short-term blip.”

Credit…Joseph Rushmore for The New York Times

The number of Americans filing new claims for state unemployment benefits totaled 1.43 million last week, the Labor Department reported Thursday.

It was the 19th straight week that the tally exceeded one million, an unheard-of figure before the coronavirus pandemic. And it was the second weekly increase in a row after nearly four months of declines, a sign of how the rebound in cases has undercut the economy’s nascent recovery. Claims for the previous week totaled 1.42 million.

New claims for Pandemic Unemployment Assistance, the government’s program aimed at covering freelancers, the self-employed and other workers not covered by traditional unemployment benefits, totaled 830,000, down from 975,000 the week before. Those numbers, unlike the figures for state claims, are not seasonally adjusted.

Initial weekly unemployment claims,

both regular and those under the Pandemic Unemployment Assistance program

Initial weekly unemployment claims, both regular and those under the Pandemic Unemployment Assistance program

“We’re still in a desperate situation,” said Diane Swonk, chief economist at the accounting firm Grant Thornton in Chicago. Noting that weekly claims were in the 200,000 range before the pandemic brought widespread shutdowns in March, she added, “This is unique in terms of the speed and magnitude of the job losses.”

What’s more, fears are growing that after rebounding strongly in May and June, the economy has run out of steam, with many states reversing the reopening of businesses.

“Everyone wants to keep putting on rose-colored glasses, but it’s blinding us to the reality of the situation and what we have to deal with,” Ms. Swonk said.

At the same time, the $600 supplemental weekly unemployment payment from the federal government is ending, a potentially crippling financial blow to millions. Republicans have proposed replacing the supplement with a $200 weekly payment, while Democrats want to extend it in full. “We’re nowhere close to a deal,” Mark Meadows, the White House chief of staff, said Wednesday.

Credit…Hiroko Masuike/The New York Times

Consumer spending, the bedrock of the U.S. economy, plunged 10.1 percent in the second quarter, the Commerce Department reported Thursday. It was by far the biggest drop on record. But the decline wasn’t across the board — and the details help paint a picture of life in a pandemic.

Spending on services fell 13.3 percent, led by a near-total collapse in spending on restaurant meals and recreation, the department’s report on quarterly economic output noted. Health care spending fell sharply, too, as patients canceled elective procedures and delayed routine care.

See also  Be persistent. Good things take time

Spending on goods was a different story. Overall goods expenditures fell a modest 3 percent, and some quarantine-friendly categories actually had increases. Spending on recreational vehicles and related goods rose nearly 9 percent as consumers sought ways to travel without getting on airplanes.

Other parts of the economy showed large contractions. Business investment, residential construction and trade — both imports and exports — all fell by double-digit percentages. One exception: Spending by the federal government rose 4.1 percent as Congress moved to prevent deeper economic damage. (That figure reflects only a small fraction of the government stimulus efforts, much of which are considered “transfer payments” that aren’t counted in gross domestic product.)

Credit…Max Whittaker for The New York Times

Stocks slid on Thursday as economic reports from the United States and Germany showed the toll of the coronavirus outbreak on growth, but a rally in shares of big technology companies, ahead of their earnings reports, helped minimize the blow to Wall Street.

The S&P 500 fell about half a percent, while shares in Europe were down by more than 2 percent. The Nasdaq composite climbed as Apple, Amazon, Alphabet and Facebook all rose. The largest technology companies often set the direction of the broad market because of their sheer size.

Oil prices were also lower, as were shares of energy companies. ConocoPhillips slid after the company said its earnings plunged by more than analysts had expected.

Financial stocks, closely tied to the cyclical ups and downs of the American economy, slumped too, as long-term interest rates — set by the yields on government bonds — continued to plumb some of the lowest levels in history.

The yield on the 10-year Treasury note fell to 0.55 percent on Thursday morning. Such yields help set the price of the loans banks make and significantly influence their profitability.

The U.S. economy shrank by 9.5 percent in the second quarter, while Germany’s economy shrank by 10.1 percent. On an annualized basis, the standard way of reporting quarterly economic data, U.S. gross domestic product fell at a rate of 32.9 percent, which is the sharpest drop on record.

Data released at the same time showed that 1.43 million Americans filed new state unemployment claims, the second week in which that number has risen and a figure that highlights the persistence of the economic downturn.

The grim data came a day after Jerome H. Powell, the Federal Reserve chair, told reporters that the “pace of recovery looks like it has slowed,” pointing to debit and credit card spending and hiring trends. He added, “The path forward for the economy is extraordinarily uncertain and will depend in large part on our success in keeping the virus in check.”

Credit…Carlo Allegri/Reuters

Comcast, the largest cable operator in the U.S., reported on Thursday $23.7 billion in revenue and $7.9 billion in adjusted profit for the second quarter, beating expectations. Here are the highlights:

  • Peacock, its new streaming product, attracted 10 million sign-ups in its first three months. It differs from other platforms like HBO Max (which netted 4.1 million in one month) and Netflix in that it is free and relies on advertising for revenue. (There is a paid tier that features more content but still includes ads.) The strategy is reminiscent of the original broadcast system, which is also free. Comcast hopes to have 35 million users by 2024.

  • With most of the country under lockdown, Comcast added 323,000 more broadband customers, but it lost 477,000 pay TV subscribers. People switched to cheaper streaming alternatives as wallets tightened under the pandemic. It’s not a bad trade for Comcast, since a broadband subscriber tends to add more profit than a video one.

  • At NBCUniversal, the lack of sports and the shutdown of movie theaters and theme parks hurt the division. Sales fell 25 percent to $6.1 billion. Theme parks took a $399 million loss for the quarter, and the Universal Studios division saw sales decline nearly a fifth to $1.2 billion.

  • But a significant deal was struck this week between Universal and AMC Entertainment, the nation’s largest theater chain, that could recast the economics of the film industry. The studio can now sell movies on streaming 17 days after it runs in theaters, collapsing the usual 90-day window. Movies tend to make most of its box office dollars in the first two weekends, so the new terms appear to benefit the studio. In other words, there will be more reasons to stay home.

  • United Airlines warned its pilots on Thursday that it might need to expand planned furloughs if demand for flights remained deeply depressed and a vaccine was not mass produced by the end of next year. The airline previously said that it could furlough up to one third of its pilots, or 3,900 people, this year and next. “That may not prove to be enough,” an executive said in a memo to pilots.

  • California Pizza Kitchen filed for bankruptcy protection in Texas on Thursday. The company, which operates more than 200 locations in the United States and internationally, said it would use the restructuring process to close unprofitable locations and cut debt, and planned to emerge from bankruptcy in less than three months. The company is the latest dining chain to file for Chapter 11 protection during the pandemic, following Chuck E. Cheese’s parent company, CEC Entertainment, and NPC International, the largest U.S. franchisee of Pizza Hut.

  • Volkswagen said on Thursday it fell into the red during the first six months of 2020 after sales plunged 23 percent compared with a year earlier. But the company, the world’s largest carmaker, said vehicle sales, which were down by more than half in May, had begun to recover.

  • Airbus reported a big loss for the first half and vowed to conserve cash; AstraZeneca reported a 26 percent rise in earnings for its first half as sales of new drugs beat forecasts; Credit Suisse beat expectations, thanks to a surge in trading revenue; trading also aided Shell, which reported a smaller-than-expected loss, and Total, which disclosed a surprise profit; and Nestlé announced an 18 percent rise in first-half profit but warned of slowing growth for the rest of the year.



Please enter your comment!
Please enter your name here